South Korea: Oil refineries loss due to COVID-19 has reached KRW5 trillion in 2020

The whole world is still fighting the coronavirus pandemic and while many counties were able to deal with the crisis, it still has negative effects that cannot be easily repaired. For instance, the economy has suffered and this is not just in one country.

Even first world countries experienced economic troubles brought about by the COVID-19 crisis and everyone is now fighting to regain back what has been lost. In South Korea, Yonhap News Agency reported that the country is also dealing with the pandemic nightmare not just in terms of health but in the economic aspects too.

The oil refiners’ loss in 2020

In particular, the publication noted that oil refiners in South Korea revealed a KRW5 trillion loss last year. This happened because the companies’ low refining margins devoured into their profitability.

Battered by reduced oil prices and slow refining margins, South Korean refinery SK Innovation Co., and three other companies are estimated to have recorded a combined profit loss of over KRW5 trillion or around US$4.6 billion in 2020.

The bad news is that the situation is said to have not improved until the last quarter of the said year. There was a slight increase in gasoline demand during in the third quarter but this didn’t help in regaining back even a bit of the loss.

Rather than slowly recover, YNA further reported that the implemented social distancing rules for the citizens have resulted to another hit for oil refiners because people mostly stay at home now. The demand has plummeted once again so gasoline and oil sales are down as well.

Can the oil refiners in South Korea recover?

The country is one of the regions that snow during winter time and the coldest months extend up to February. Around this time, heating is necessary and in turn, oil sales may go up. Thus, local oil refiners may see a recovery by the second half of 2021.

Furthermore, Business Korea previously reported that the region’s local oil refiners may also benefit from the closure of refineries overseas. It was mentioned that in the U.S., the country’s largest oil refining company, Marathon Petroleum, closed its business last year and a company in Australia is also planning to shut down its plant. Other Asian and European countries have oil companies that are closing as well.

As these facilities cease operations due to the impact of the COVID-19 situation, the demand for oil from South Korean refineries may increase. In 2021, the major players that include Hyundai Oilbank, SK Innovation, S-Oil and GS Caltex are projected to earn KRW1 trillion each as the demands grow.